Hurricanes and their potential impact on natural gas supplies and prices are no longer a major concern of gas utilities in the Pacific Northwest, utility officials said at a workshop held last Tuesday by the Oregon Public Utility Commission (PUC). It is a reflection of the fact that the ramp-up of Rockies and general shale production has made the Gulf of Mexico supplies less critical for their region.
In the session, the PUC commissioners commented on how this year’s meeting was “much better than last year,” when the utilities were forecasting 20-40% rate hikes because of the spike then occurring in wholesale gas prices.
Oregon’s major gas distribution utilities told the regulators that retail rates could be 10-20% lower by Nov. 1 when annual gas cost adjustments are made in their rates. Last November Portland, OR-based Northwest Natural Gas Corp. increased rates 14.3%; Seattle-based Cascade Natural Gas Corp. increased its retail rates 5.4%; and Spokane, WA-based Avista Utilities dropped its rates by 2.9%. “Now all three of our natural gas companies anticipate being able to substantially reduce customer rates,” said PUC Chairman Lee Beyer.
In an annual forecast meeting hosted by the three-member Oregon PUC, an overall picture of flat supply/demand and slumping, although still volatile, wholesale gas prices was echoed by representatives from the Northwest Gas Association and the three utilities, Avista, Cascade and Northwest Natural. All three will file for their November gas rate changes in August.
“The impact of the Gulf of Mexico production just isn’t what it used to be,” said Avista’s Kevin Christie, who is expecting “prices to stay about where they are” overall in the upcoming winter heating season of 2009-10. “Historically, natural gas prices have been affected by hurricanes due to their impact on production, but the Gulf now contributes only 14% of the Lower 48 production, compared to 25% [previously].”
Mark Sellers-Vaughn, the gas supply expert from Cascade Natural Gas, echoed Christie’s thoughts, saying there is “no cause for concern” from hurricanes’ impact on supplies and prices this year. “Current atmospheric models are generally quiet in the Atlantic Basin,” Sellers-Vaughn said (see related story).
“Overall, prices are still relatively low compared to last year,” he said. “And at this time hurricane season is not impacting prices in the near term.”
Randy Friedman, gas supply director at Northwest Natural, said he believes U.S. gas prices may have bottomed.
“We are moving back to more long-term contracting because we do think we have hit a bottom, and thus it is a good time to get back into longer-term deals, which we haven’t done for awhile,” Friedman said.
Northwest Natural has a weighted average cost of gas (WACOG) that is based on a combination of WACOGs from Alberta and U.S. Rockies supplies, said Friedman. He said that his utility is currently looking at a WACOG that is declining by about 20 cents/therm, so he is expecting an upcoming retail residential rate decrease of 15-20%. However, he characterized his projections as “very rough,” saying they will change before the utility makes its annual gas cost rate adjustment filing to the PUC.
This projected decrease is in addition to the $32 million decrease that Northwest Natural recently refunded to customers, Friedman said.
PUC commissioners and staff use the annual summer meeting to get an early assessment of gas prices for the coming fall and winter, a commission spokesperson said. There are about 360,000 Oregon natural gas customers receiving supplies from one of the three private-sector utilities.
Meanwhile, Cascade Natural Gas on July 2 filed its annual purchase gas adjustment (PGA) with the Washington Utilities and Transportation Commission, reflecting a wholesale gas price decline that results in a 13.67% drop in retail natural gas bills, effective Aug. 1. Cascade said the average residential monthly gas bill will drop by about $10.75. Commercial customers will see a slightly larger decrease of 14.31%. Cascade said it intends to make a similar PGA decrease filing in Oregon this fall.
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